Hannibal Inspires GM’s Girsky to Slash at Opel’s Culture
As General Motors Co. (GM) Vice Chairman Steve Girsky took a new assignment last year to stem more than a decade of losses in Europe, a colleague gave him a Latin phrase that translates as “I shall either find a way or make one.”
It’s supposedly a quote from Hannibal in response to his men telling him it was impossible to cross the Alps with elephants, Girsky said last week in an interview, as he pulled up the Latin writing on his iPad Mini.
While GM is the leader in China and the U.S., the world’s two biggest markets, Europe remains spectacularly challenging. GM’s goal of ending deficits there by mid-decade is just about as daunting as Hannibal’s trip. Its European operations have lost $18 billion since 1999, including $1.8 billion last year, and the market continues to fall for a sixth consecutive year.
More than just losses, Girsky, 50, said he is fighting a culture within Opel that sees itself as an entity totally separate from GM even after more than eight decades of control. From the start, Girsky said, he wanted to uncover what needed to be changed and made about 40 trips to Europe in the past year.
“Every time you opened the door, more dead bodies fell out,” Girsky said. “Everything was a series of surprises. You’d peel back a layer of the onion and you’d find more issues. That was frankly the goal early on: Let’s find these issues. We sell a million units with this brand. We should be able to make money.”
At least Girsky can take on Europe against a backdrop of a resurgent GM. The company has had three straight profitable years since its 2009 bankruptcy and restructuring, making money last year everywhere else in the world as well as with its financing business. It had a $6.95 billion pretax profit on its North American operations last year, once again became the top automaker by sales globally in 2011 before losing the title to Toyota Motor Corp. (7203) last year and is broadening its lineup with higher quality cars at more price points than ever.
While the auto industry’s struggles in Europe are a concern for every automaker selling vehicles in the region, GM has been dealing with turmoil there for more than a decade. GM’s losses in Europe weighed down the company’s profit last year as net income declined 33 percent to $6.19 billion from $9.19 billion. The automaker faces increased pressure from Toyota (7203) and Volkswagen AG. (VOW)
In last week’s interview at GM’s Detroit headquarters, Girsky shared his unique perspective on the political and business challenges he and the largest U.S. automaker face in Europe, where Girsky has heard that “Americans are the root of all evil.”
His frustrations were not just with unions.
“My first experience on the Opel board, the meeting started at 10,” he said. “They met for an hour, then broke for lunch.”
To stop the losses and change the culture, Girsky set about a management shakeup that has included hiring a former Volkswagen executive as Opel’s new CEO, replacing Karl-Friedrich Stracke; pulling senior GM executives deeper into the brand’s operations; forming a partnership with PSA Peugeot Citroen (UG), which GM has said targets $2 billion in cost savings; and pushing to close the first auto factory in Germany since World War II.
His moves remain deeply controversial.
“There are more than 30 years of disappointment at Opel,” said Ferdinand Dudenhoeffer, director of the Center for Automotive Research at Germany’s University of Duisburg-Essen. “There was a chance for Girsky to change the situation. He had products like Opel Ampera and like Opel Adam. However, he came up with firing Stracke.”
The long-time tensions at Opel are as fundamental as differences between Germans and Americans, even including how to build a car, said Warren Browne, a retired GM executive who worked in Europe and Russia, among other locations.
“The level of turmoil that’s existed on the engineering side in terms of how to make a car is at the root of what many describe as cultural differences,” said Browne, now a vice president for consultancy AutomotiveCompass LLC. “Any program that the two have tried to do jointly historically has always run into difficulties,”
Germans focus on how a car handles and feels on the road, for instance, while Americans want comfort, he said.
Those tensions have been heightened by how GM allocates profit and losses among its regions, he said. Chevrolet sales in Europe, for example, go to GM (GM) operations run out of Shanghai because GM records the profits of a vehicle in the region where it’s built. While Chevrolet and Opel are both part of GM Europe, their cars compete in the same area.
“The profitability tension of Chevrolet growing in its market share in Europe without Opel sharing in the profitability or the rewards further threw fuel on that fire,” Browne said.
It only made things worse when, in 2009, the automaker prepared to sell off the unit following its U.S. bankruptcy reorganization. Then-CEO Fritz Henderson was in the final stages of a deal when the automaker’s new, post-bankruptcy board voted to keep Opel. Girsky, also a GM director, was part of the group advocating to keep Opel and has said GM needs to be in Europe if it’s going to be competitive globally.
“Whatever tensions existed were exasperated by that,” said Browne.
Girsky, who joined GM in 2009 as a director after working as an industry analyst and adviser, including for the United Auto Workers, arrived into that contentious world in November 2011 when Chief Executive Officer Dan Akerson made him head of Opel’s supervisory board, which is similar to a board of directors in the U.S. In July 2012, Akerson named him interim head of GM’s Europe operations after Stracke was pushed aside.
“One of the biggest challenges is this culture issue of they’re an island unto themselves,” Girsky said.
A first key step in changing the culture was placing senior GM executives, including Chief Financial Officer Dan Ammann, on the Opel board, Girsky said.
“We needed to connect Opel with the rest of the corporation,” Girsky said. Adding top GM executives to the board “forces them to come out regularly and it forces Europe to be responsive.”
Next, Girsky said, he went about changing many of the senior executives at Opel and installing a new set of guiding principles. Those included “protect the product,” “respect the customer” and “no surprises.”
One final rule is Girsky’s now-favorite Latin phrase: “Aut viam inveniam aut faciam.” He has written it on a card that he sometimes displayed during meetings to emphasize his urgency.
He pushed executives to be more aggressive, including a marketing campaign to counter Fiat SpA (F)’s ads touting the 500 over Opel’s new Adam subcompact car. The GM brand responded with its own ads.
Girsky questioned why Opel wasn’t taking advantage of GM’s ability to put Apple Inc. (AAPL)’s Siri voice-recognition in its cars.
“Chevrolet had Siri enabled in their cars; Opel was going to wait a year,” Girsky said. “The problem was nobody at Opel asked and nobody at GM offered” -- it was “just disconnected.”
Girsky routinely talks about the need to improve GM (GM) with good new vehicles and not just cost-cutting. The company is bringing out 23 new Opel products by 2016, including the Mokka compact sport-utility vehicle. New Opel models, including the Adam, a sporty subcompact, and the Ampera, the European version of the Chevrolet Volt plug-in hybrid, are winning positive reviews.
‘Better Without GM’
Cost cuts, however, are also part of the plan. GM has already announced plans to eliminate $500 million in annual costs over three years in addition to cutting $300 million in spending. The company eliminated 2,000 jobs in Europe last year, according to a company regulatory filing.
One of hardest parts of Girsky’s job has been dealing with German unions. Workers have picketed with signs that read: “Besser ohne GM.”
That’s German for “Better without GM.”
Girsky said he’s worked to improve relations with Opel’s union, pulling inspiration from his work in improving GM (GM)’s relationship with its U.S. union, the United Auto Workers.
“We said in Europe, when you’re losing $4 million day, I’ve got nothing to lose,” he said. “I’ll take a good idea from anybody if it will help me sell more cars.”
His challenge is to close the first auto factory in Germany since World War II. After GM secured a new labor agreement in England in May, Girsky focused his attention on worker costs in Germany. All but one of GM’s German factories approved a plan this month to save about 20,000 jobs in exchange for freezing wages through 2015.
Workers at Bochum, the plant GM wants to close, voted last week to reject the agreement, which would have kept the facility making vehicles through 2016 and parts of it open beyond that as a components and logistics center. In response, the automaker reiterated that it will stop work at the plant by the end of 2014, when the current labor agreements ends, and not engage in further contract negotiations.
The Socialist Equality Party of Germany and the International Committee of the Fourth International’s World Socialist on March 15 called on Opel workers to reject the labor agreement. “A workforce renowned for its militancy is to be brought to its knees,” the statement said on the World Socialist website.
Instead of just closing a plant up front, GM was able to use the possibility of saving a factory as a way to get greater concessions from all of the plants, Adam Jonas, an analyst with Morgan Stanley, said in a telephone interview.
“He’s got a tough hand; I think he’s playing it well,” Jonas said. “I don’t want to say it’s ‘Mission: Impossible,’ but it’s been an agonizingly difficult operating environment.”
Since January 2012, only four of Opel’s top 18 leaders remain. Girsky hired Karl-Thomas Neumann, who had led Volkswagen’s China operations, to head Opel. Neumann, who also leads GM Europe, began his new position on March 1. Girsky remains head of the board and now travels to Germany less often.
Girsky, along with Mary Barra, 51, GM’s top product- development executive, and Mark Reuss, 49, head of its North American operations, are seen as possible CEO successors when Akerson, 64, leaves, people familiar with the thinking have said. Ultimately, Girsky’s success may be judged on how Opel turns out.
“If Europe does not turn around materially, then it would be hard for Steve to make the case that he can run the full company,” Jonas said.
Opel’s public image has suffered from Girsky’s approach, said Dudenhoeffer of the Center for Automotive Research.
An e-mail Girsky sent in January to workers threatening Bochum’s closure by the end of next year if the concessions weren’t approved was covered negatively by German media, he said.
“Everybody in Germany was confronted with the question: Is that a modern company?” he said. “I’m not sure whether Girsky was successful.”
To Girsky, however, this is all just part of a very long journey. As Girsky handed-off day-to-day control of Opel to Neumann, he presented the new executive with that card with his Latin inscription.
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